Property tops 10 and 20 year investment returns

Residential property tops the league table of mainstream assets – and that’s great news for downsizers.

Empty nesters could be sitting on a gold mine, with a new report by the ASX and Russell Investments showing what an outstanding investment residential property is.

Annual average gains topping 10%

According to the report, over the last 10 years to 31 December 2017, residential property has delivered before-tax gains averaging 8.0% annually – the highest of any mainstream asset class. By way of comparison, Australian shares recorded gains over the same period of just 4.0%.

Proving that these results are no flash in the pan, the 20-year returns on residential property averaged out at 10.2% annually. Here too this topped the league table of mainstream assets. Australian shares delivered annual 20-year gains averaging 8.8%.

Seasoned investors know that past returns are no guide for the future, but as our population is set to grow, there is no reason to think that a well-located property won’t continue to notch up healthy gains.

What does this mean for empty nesters?

The exceptional long term returns on property can impact empty nesters in two ways.

Firstly, downsizing your home can mean tapping into valuable equity in your current home as a means of enjoying a more rewarding and financially-free retirement.

It’s a fair bet your new downsized home will also rise in value over time. So downsizing doesn’t mean switching out of property altogether. Rather, it’s a lifestyle-driven move within the same asset class.

The second point is that you don’t have to wait until retirement to buy your future downsized home.

Investing in, say, an apartment today, can offer the benefit of rent returns and negative gearing to help pay off the property, while the family home continues to earn robust long-term gains. Then, when the time to downsize rolls around it’s a matter of selling your primary home and moving into the apartment.

Purchasing your future home today, is a strategy that could work for you especially as it means buying your it at today’s prices. And as the long-term gains on property confirm, the prices we pay today often appear laughably low in the future.

Downsizing – path to a stress-free retirement

Any decisions regarding your retirement should be carefully considered. And downsizing is no exception. But one factor empty-nesters can be confident about, is the opportunity that downsizing provides to boost your retirement nest egg while still providing valuable exposure to the property market.

Greg Oddy is Director of Sales and Marketing for Seniors Housing Online and Downsizing.com.au

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